New UK tax plan: wise investors avoid April’s stamp duty hike

Stamp duty to be paid on all second properties purchased after 1 April 2016.

To avoid stamp duty, we recommend:

investing through family members

changing building ownership

1 April 2016 saw the anticipated rise in UK stamp duty come into practice, after a month of frantic property purchasing with landlords and investors fighting to complete before the deadline. Under the new rules, all second properties, whether owned by UK residents, non-doms, expats or other nationals will be subject to an additional 3% SDLT (stamp duty land tax) liability. One of the main impacts of the new law is reduced purchasing power for landlords, who will now be forced to make lower offers in order that the SDLT can also be covered.

There are ways for Hong Kong investors to legally avoid the increased stamp duty

The Managing Director of ARLA (Association of Residential Lettings Agents), David Cox, says, “We’re about to see supply nose-dive, demand sky-rocket and rent prices go through the roof. The introduction of the new stamp duty charges is set to push the private rental sector into a state of despair.” *

While this prediction is probably true in the short term, we feel the situation will inevitably settle down again after this period of change, and investors’ purchasing power will re-establish itself.

There are still ways for Hong Kong investors to legally avoid the increased stamp duty, thus retaining purchasing power and not finding themselves out of pocket. One of these is to purchase property through family members who don’t currently own any property, by gifting them with funds with which to make the purchase. Once the property is purchased it will be the child’s one and only property and therefore exempt from SDLT.

Companies which own residential property in the UK are now being charged a higher rate of SDLT simply because they are corporate bodies. A way to avoid this is to move the property out of the company and transfer it to an individual. This should incur lower taxes provided there is no mortgage.